The course director at Charles Sturt University’s AML-CTF, Fraud and Financial Crime programs, Hugh McDermott, said companies were obligated to report suspect transactions to the Australian Transaction Reports and Analysis Centre (AUSTRAC) through a suspicious activity report.

“All the banks are going to have to review their processes to make sure they don’t get caught up," he said.

The US attorney demanded that billions of dollars derived from the criminal conduct, including up to $US36.9 million held in three Westpac accounts in the name of Technocash, be forfeited.

It is understood the funds belonged to Technocash clients, most likely from overseas. As well as Westpac, Technocash held accounts with National Australia Bank and Bankwest, though they were not identified in the investigation.

Paul Monsted, the head of Technocash, which exchanges about $150 million a year for international business clients, said last week that the company had helped authorities in identifying suspect transactions.

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Banks likely to avoid sanctions if appropriate steps followed: expert

Under the AML-CTF law, regulated entities must do due diligence on account holders through their “know your client" obligations, implement systems to manage their risks, report all international transactions and domestic cash transfers greater than $10,000 to AUSTRAC, and alert authorities to any suspicious transfers.

Lander & Rogers Lawyers partner Terry Brigden, who is also a director of an Australian subsidiary of a foreign bank, said if banks followed such steps, they would probably avoid sanctions. “There wouldn’t be any direct liability," he said.

The due diligence required for offshore customers is a higher standard, particularly for certain jurisdictions.

Dr McDermott said banks needed to take a risk-based approach and pay extra scrutiny to customers and transactions in places like the Middle East and the Cayman Islands.

“They really have to dig down and know who their customers are."

Dr McDermott said the outcome for Technocash would depend on its role in the events. “If Technocash did turn a blind eye they could be pulled in front of the courts and charged," he said. “If they aren’t involved, AUSTRAC and the AFP [Australian Federal Police] will speak to them, but they could walk away."

Mr Brigden said: “The bank can’t do anything more than report their suspicions, because they can’t just suddenly freeze money because they have legal obligations to the account holder."

Lexcel Consulting managing director Paddy Oliver, who advises companies on complying with their anti-money laundering obligations, said if the companies had rigorous AML-CTF systems in place or reported any suspicious transactions to AUSTRAC, they could avoid sanctions. “Westpac and Technocash could easily have been meeting all their AML/CTF ACT obligations," Mr Oliver said.

“The common thought among the AML profession is that both companies could have been meeting their obligations even though this has happened."

Westpac has said it takes money laundering extremely seriously and spends tens of millions of dollars combating it.